Do You Panic About Investment Performance?

by Stephen Smalenberger, EA / September 1, 2017

We have been attending a conference in Dallas over the past week.  After leaving the hotel, we started hearing that many gas stations throughout the city and suburbs were actually out of gas.  Due to the rising prices caused from the destruction that Hurricane Harvey had on the Houston community and two oil refineries there, fear of shortages spread.

As people panicked, they rushed to the pump to fill their vehicles and storage containers, making the situation worse.  As we later learned, there were actually plenty of reserves the entire time.

However, the combination of fear, a sudden discrepancy between supply and demand at gas stations, and long lines set off a “crowd panic”.

As the markets rise and fall each day, how do you feel about your portfolio?  Do you experience contentment, frustration or maybe even fear?

  • Are you content with the investment growth?
  • Are you frustrated when you don’t earn the highest return possible?
  • Do you fear that you will run out of money and not be able to achieve your goals?

We are big supporters of having a plan in place.  We believe you should not only measure the investment performance of your portfolio by defined benchmarks/indexes but also by the specific objectives/goals you have.

For example, if your Financial Plan states that you need a 5% annual return to reach all of your goals and you are currently receiving a 7% return, you should be satisfied you are on-track, right?

People often exclusively compare their performance to a market index which may or may not be an accurate measurement.

What happens when you’re receiving a 7% annual return but the market is providing a 10% return?

Do you have a growing discontentment that you aren’t beating or at least meeting these returns?  What if in reality you are on-track to reach your goals the entire time but the sense of fear or frustration distracted you from knowing this?

There is a healthy level of attention that you can give to your investment performance.  Yet when it starts to distract you from the progress you’re making and causes discouragement with your plan that is accomplishing exactly what you desire, it becomes unhealthy.

As we work with clients, we want to hear their stories.  We want to know how they view, value, and want to use their money.  Because, in its simplest form… money is just a tool and we should never allow it be something more that causes us to fear!

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Schedule a quick call with our financial advisors.